Fallen trees, signs ripped apart, businesses and homes flooded to their roofs. These scenes weren't just played out on the news and in the paper; they were right in the fitness community's backyard. Hurricanes Katrina and Rita left their mark on fitness facility owners, staff and members in the coastal regions of Louisiana, Mississippi, Alabama, Texas and Florida. Numerous efforts across the country by the fitness industry have raised money, donated supplies and even offered housing and jobs to displaced evacuees.
Economic analysts estimate Katrina's total cost to be $200 billion and Rita's to be $7 billion, but of the clubs in the area that are still standing, damage estimates are still being calculated. As of press time, some clubs in the New Orleans area were still under water and were expected to be a total loss. Other clubs on the Mississippi coast, the area that Katrina hit the hardest, may be completely destroyed.
The magnitude of the disaster is still unknown and may continue to be for the coming weeks, months and possibly even years. But many fitness professionals say the industry will bounce back; it's just a matter of when.
The International Health, Racquet and Sportsclub Association (IHRSA) estimated that roughly 173 clubs operate in the areas affected by Katrina.
“Obviously, the effect has been devastating on all of the businesses in that area,” said John McCarthy, executive director of IHRSA. “And at the very least they have all had to shut down.”
Facilities that were fortunate enough to have electricity right after the hurricanes opened their doors to their members and the community. Other clubs suffered from extensive water and wind damage that necessitated a clean-up job, and in some cases, a complete reconstruction. The storms' effect on the industry is devastating in a number of ways, McCarthy said. Facilities that had to close for days, weeks or even months incurred substantial revenue loss and the business interruption may have halted any momentum clubs had generated in their programming and memberships. The clubs also faced accounting issues such as how to handle active membership agreements and payroll with staff members, who were among the evacuees scattered across the country.
“The clubs will try to be as fair and as generous as they can, but they can't kill the company,” McCarthy said. “I think everybody down there is attempting to put the pieces together and doing so heroically, but it's a challenge like no other.”
Christy Murphy, marketing director of Cross Gates Athletic Club in Slidell, LA, a northeast suburb of New Orleans, said she hoped to be back at her club within a year. Murphy and her family fled to Tennessee after a mandatory evacuation. Of the club's two locations one suffered extensive damage and was closed indefinitely. The other incurred minimal wind and water damage and was opened a few days after the storm. Still, many residents who are back in the city are more focused on clearing trees or protecting their homes from growing mold than getting a good workout.
“Who would I market to?” Murphy asked.
It may take months, but Cross Gates plans to rebuild a bigger and better club at its location on Pontchartrain Drive despite not having flood insurance, said Dion Grossnickle, general manager. Weeks after the storm, he helped clear from his club 6 to 7 inches of mud littered with snakes and debris that washed in with the tidal surge that destroyed all of the equipment.
Michael Papamichael, CEO of Boca Raton, FL-based Michael's Body Scenes (which was damaged in two hurricanes last year), said about clubs devastated by Hurricane Katrina, “Clubs may end up losing members. It just depends on where the damage is. People aren't going to be thinking about joining a club even if you open your doors.”
West Jeff Fitness Centers also had extensive damage to one of its two facilities. The 26,000-square-foot Oakwood location in Terrytown, LA, (about a seven-minute drive from downtown New Orleans) sustained broken windows and flooding that caused an outbreak of mold and mildew and ruined much of the fitness equipment. The company's Marrero, LA, facility survived Katrina with only minimal damage and served as a housing unit for the Disaster Medical Assistance Team. Tim Bracey, director of the West Jeff Fitness Centers, said for those in the affected region, life would never be the same.
“Hopefully, in time, things will continue to get better as we rebuild a city, a community, and ultimately the fitness center community within the community,” he said. “As most of us in the industry know, fitness centers provide much more than exercise — we provide positive health and emotional, social, physical and even spiritual well-being for many people.”
Curves had 72 franchises operating in the affected area, said Becky Frusher, communications specialist for Curves. While the first priority was making sure franchisees and members were alright, the company quickly waived all royalties for the month for affected franchisees and plans to continue to do so depending on a facility's condition.
“I think it's way too early to tell in some of those areas if they'll rebuild,” Frusher said. “It may take us a year to learn everything that really happened.”
Management at Franco's Athletic Club Lakeview in New Orleans couldn't be reached for this article, but the facility's Web site reported that the club was under 12 feet of water after the 17th Street levee gave way. Franco's other location in Mandeville, LA, however, had only minimal flooding, fences and trees down, sign damage and damage to the clay tennis courts. The Mandeville location opened in mid-September for limited usage.
Rebuilding a Region
Whether or not a club decides to rebuild depends on a number of factors. Some may choose not to rebuild because the market simply isn't there anymore, said Rick Caro, president of Management Vision, a New York-based consulting firm.
“The questions are, what's the timing, and when will it be rebuilt?” he said. “Those businesses should have a master plan to succeed, but not everything will come together quickly or at once.”
Most large clubs have property, liability and business interruption insurance and could reopen and rebuild, but small clubs will have to be handled on a club-by-club basis, McCarthy said.
“Every one of them has to make their own decision,” he said. “You have to look at each site and ask if this makes sense to do this again.”
Insurance cost estimates are still uncalculated. Assessing the damage and lost revenue could take months, said Ken Reinig, president of Association Insurance Group, which still has outstanding claim issues from last year's Hurricane Ivan.
Stacy Andreas, a partner in Lathrop and Gage's Kansas City, MO, office who practices insurance coverage law, said in a natural disaster such as a hurricane, flood damage is the worst kind of damage because most people don't carry flood insurance due to cost or even availability. Even the National Flood Insurance Program has limited coverage with high deductibles on commercial buildings, Andreas said. For those with flood insurance, most flood-related claims will go unpaid, Reinig said.
In some cases, part of the flooding damage may be covered by insurance, but legally the issue gets complicated, Andreas said. Most business owner policies cover wind or wind-driven rain damage, meaning that clubs can get some coverage if part of the damage is caused by wind, even if flooding exacerbates the problem later.
“Nobody knows what the final tally will be, but this is right up there with the worst disaster the insurance industry has ever faced in my opinion,” Andreas said.
Pricing had been dropping for commercial property insurance, and wind coverage was still available on a limited basis for the coastal states, but that's sure to change, Reinig said.
“I am anticipating that finding wind coverage will become problematic and rates will adjust upward slightly,” Reinig said. “The real problem is availability of coverage through private insurance companies. They are starting to feel a little jinxed about writing business in the southern States.”
A Renewed Focus
While complete recovery may take years, many facility owners are focusing on the future — and plans to make it brighter than before.
Olaf Ross, president and CEO of North Cypress Fitness Studio in Hammond, LA, also owns a consulting firm that has worked with many facilities in the South. Although many owners may not rebuild their clubs due to age, membership base and/or location — especially older facilities that didn't have coverage — some might, in fact, flourish, he said.
“It has become very expensive to open health clubs, and especially after a storm like this, it will be even more so due to the high cost of building materials, equipment and shipping,” Ross said. “While this may be the demise of some clubs, others will flourish and new ones may find the opportunity to break into a market that may have been saturated before.”
Ross' facility had minimal damage, but still had to close for a week after the storm, resulting in about $15,000 in lost income. Despite the loss, he is trying to stay positive, and he has talked to other clubs that plan to rebuild.
Brian Drum, president of Drum Associates, a New York City-based global executive search firm, said it is possible to come back from a disaster. Although not a health club, his business was shut down for months after the September 11, 2001, terrorist attacks, and it took the small business two-and-a-half years to rebound.
Above all else, fitness facilities should remember their roots, he said.
“The people who started these clubs shouldn't forget that they're entrepreneurs,” Drum said. “They have that gusto.”
Steps to Take After a Disaster
Notify all of your insurance carriers
Even if you think a policy won't provide coverage for the disaster, let all carriers know you were affected by the disaster. If you can't get through by phone, send a letter.
Do it quickly
The earlier you make your claim the better off you are.
Document everything
Take photos or videotape footage before and after the storm. Also, document all telephone conversations you have with your insurance company with a follow-up e-mail stating the purpose of your call. Photocopy all letters and information and document your loss of profit and loss of inventory.
Get an extension
Many companies have short timelines for filing claims (30-60 days for some), so if your claim is still unresolved, get the insurance company to commit to a deadline extension in writing.
Make sure it's an advance
If you are offered an advance from your insurance company, make sure it's an actual advance and not a final payment.
Apply, apply, apply
Numerous government grants are available. Appoint someone on staff to find out what you're eligible for and send in your application. A good place to start is the United States Small Business Administration at www.sba.gov.
Contact your bank and vendors
The most important thing for small businesses is cash flow. Make sure your suppliers and bank are aware of your damages, and they may cut you a break.
Goes with the Territory
George Brown, director of university recreation at the University of Alabama in Tuscaloosa, will never forget the two weeks after Hurricane Katrina. His 200,000-square-foot student recreation center (SRC) that was usually a hot workout and intramural sport spot for students, staff and faculty, became a Red Cross shelter housing almost 600 New Orleans evacuees, many of them from the poorest areas of the city.
The SRC became a city in and of itself. Food was handed out, arts and craft activities were set up for the children in one of the group exercise studios and sleeping quarters were laid out in the north gym. The family changing rooms became a safe Internet zone where evacuees could search for loved ones and post their location online. A communications/social room with televisions allowed evacuees to watch the day's events unfold in their city a five-and-a-half-hour drive away.
As the days passed, Brown was concerned about filling his role as the director of university recreation since members of the university community were dealing with the tragedy and needed stress relief. On Sept. 1, just four days after the storm hit, he opened part of the recreation center for normal business, but many of the members were more interested in helping the evacuees than exercising. Some helped with child care, some donated toys, clothes and other supplies; others simply spent time with the new residents. The facility even held a teen mixer, organized an outdoor pool party and asked hairstylists to come into the club.
Brown said people in the fitness world may be better able to handle this type of a situation than other industries because they are used to dealing with cranky members, broken equipment and accidents — all of which have elements similar to crisis management.
“People in the fitness industry have unique capacities to do this because they deal with a myriad of challenges everyday,” he said. “I think we were pretty well prepared for it, not perfect, but prepared.”
Brown expected recreation centers to continue to play a large role on campuses as they reopened and rebuilt.
“I can't imagine a campus not rising back up and having a campus recreational center facility,” he said. “It's too embedded in the campus culture. The question is, how long will it take?”